It’s always interesting to look at the earnings reports of the Death Care industry’s public companies and try to not only glean how those companies are doing, but, what does this mean for my independent funeral home.  I think, as I’ve read the reports  Wednesday night and into Thursday, this quarter is no exception in trying to find some similarities and/or trends.

As reported yesterday one company (SCI) surprised to the upside with earnings and one company (Carriage)  disappointed to their projected earnings.  However, neither company moved the market with their announcements and I believe that funeral service is such a slow moving, daily grind business that a single report never really moves institutional investors.  So, this is no surprise.

Here is the SCI Press Release.  Here is the Carriage Services Press Release.

What do we think the earnings reports tell us?  Certainly, it is pretty much as we expected when you look at where funeral service is going in the long run — trending to more and more cremation services.  I also think the reports tell us a little of the DNA of the two companies and their differences.  Here is a little of what I take from the reports:

• SCI is a more encompassing funeral/cremation services and cemetery company whereas Carriage Services really serves its purpose in the funeral/cremation services niche, and is not as big in the cemetery area.  I think that manifests itself in a couple of ways —  first of all, SCI had what they call “Comparable” at-need funeral revenues that were 3.9% lower than the previous year, but had at-need cemetery revenues that were 1.1% greater than a year ago.  Carriage Services has what they call “same-store” sales and in the funeral area they were 1.6% higher than a year earlier and in the Cemetery division they were 3.6% lower.  I think those results are somewhat indicative of how each company thinks, but also indicative of the metropolitan nature of SCI and the less metropolitan nature of Carriage.
• Comparable Pre-Need sales for SCI are down 2.6% in the Funeral Division while they are up 4.1% in the Cemetery Division.  This probably indicates a growing trend toward cremation in the Pre-Need markets which results in a lower sale at the funeral home.   Anecdotally, I’ve seen higher cemetery sales for crypts and other memorialization products for cremation consumers and that could be driving higher Cemetery Division Pre-Need.
• SCI is in more competitive markets than Carriage Services.  SCI has what they call “Comparable” At-Need Revenues for Services that are down 2.1% over the same period of a year ago whereas their comparable number of services are actually very slightly higher.  I believe this represents not only more cremations, but quite possibly more price competitive markets.  Remember, a recent NFDA survey showed more families are now comparison shopping and my guess is that is more prevalent in metro markets.
• Pre-Need is a troubling tenant of what I see in this report for Carriage Services.  They report a number, in what they call Pre-Need Funeral Commission Income,  that is 18.1% lower in 2017 than the same number for 2016.  No other information is given which leads me to believe either they are starting to write a goodly amount of pre-need in what will become cremation families (lower dollar amounts) or they are simply off about 1/5 of their business here because of market shifts among future clients.  As these contracts mature neither circumstance will be good for them.
• Finally, for the three months of reporting as compared to a year ago, Carriage Services has a statistically insignificant Revenue per case increase of less than 1% on all services.  SCI has the same statistically insignificant number but it is about 0.6% in the negative direction.  This is probably a direct result of what SCI calls their “Core Cremation Rate” ticking up 1.1% to 46.7%.  As we move forward we look for that rate to continue to tick up with new consumers and the revenue per case to move downward. . . .a challenging quotation for the industry.

So there you have it.  We could talk a lot more about what we see, however, we certainly believe that there are no surprises here  — if you believe that cremation is growing, especially in rural areas,  and metropolitan areas are getting more price competitive — I think that there is information in these reports to back that assumption.  Knowing how that relates to your funeral home is what you need to figure out going forward.[wpforms id=”436″ title=”true” description=”true”]